The following information is intended as a guideline for persons wishing to purchase property in Spain, and is not meant to replace professional advice. We strongly advise prospective purchasers to seek independent legal advice prior to signing any documentation.
What are the first steps?
By the time you have found a property you wish to buy you should ideally already have decided on the building society or bank you will be using, and the amount and type of mortgage you will be having. Lastly, but by no means least you should also have obtained quotations from a few solicitors and decided on which one you will be instructing in regards to the purchase.
What is a management company?
The majority of modern property developments in Spain have a management company, which manages the upkeep of the property development as a whole. The persons who own units within the property development own the Management Company and contribute to the running costs of the property development by way of service charges.
Do I need a Survey?
When you buy a Spain or Gibraltar property, the legal principle of “caveat emptor” (let the buyer beware) applies. To protect yourself, you need professional advice from a surveyor.
Before your bank or building society agrees to lend any money, they will insist on a survey of the property. In reality it will consist of little more than a valuation for mortgage purposes, unless you ask and pay for a more extensive survey.
Please contact us if you would like a quote from one of our panel of surveyors.
Which solicitor should I appoint?
Choosing a solicitor is not necessarily an easy matter. Although cost is an important factor, above all else you will want someone who will do a good job for you. Speed is vital because a delay at any stage could result in you losing the property you want. Hence the importance of your chosen solicitor keeping in contact with you on a regular basis.
House sales can fall through for many reasons, and it s advisable to ask your solicitor in advance what he would do regarding charging you in the event that the sale fell through for no fault of your own. If for example, you find an alternative property, many solicitors will not charge other than a nominal amount, but the point is well worth checking.
Please contact us if you would like a quote from one of our panel of lawyers.
What are the approximate property purchase costs?
As a guide, the total official costs involved in purchasing property are just under 10% of the purchase price on average, which is comprised as follows:
7% Transfer Tax:
Based on the total purchase price. If you purchase real estate (including a villa, apartment, land, commercial premises or garages) from a vendor who is neither a developer or a habitual trader in the property resale market.
Or
7% VAT & ½% Stamp Duty:
If you purchase real estate (including a villa, apartment or garage) from either a developer, promoter or a habitual trader in the property resale market.
Or
16% VAT & ½% Stamp Duty:
Where the vendor is a developer, promoter or a habitual trader in the real estate market and you purchase either Commercial premises, commercial garages or land.
Notary & Property Registry Fees:
Depending on the final purchase price, the notary and registry fees should not amount to more than approximately £800 for smaller properties up to €120,000 and £1000 for a property valued at €130,000.
Legal Fees:
These are normally based on 1% of the purchase price, but be prepared to shop around and you should be able to get competitive quotes.
Plus Valia Tax - (Capital Gains Tax):
This tax is based upon the increase in value per square metre of the land from the prior (vendor’s) purchase to the present day, according to the Town Hall Index value. In principle this tax corresponds to the vendor, but it is common practice along the Coast for the purchaser to pay it, because in the event of non payment by the vendor, the authorities will look to the current owner of the property for settlement.
As there are several variables used in calculating this tax, the amount payable can vary substantially and it is advisable to verify the amount payable before proceeding with the purchase.
Is there a Withholding?
Upon a non-resident selling their property, there is an automatic tax retention of 3% of the sales price, payable against a maximum 18% capital gains tax.
However, if the seller is a resident in Spain, there is a flat rate of 20% capital gains tax (adjusted to compensate for inflation) if the property has been owned for two or more years.
